The past few months have seen an unprecedented increase in financial pressure, with spiralling energy costs, inflation and now increased interest rates taking their toll. Just as these increased costs of living are having an impact on families, they too are being felt by businesses.
Companies that are struggling to manage higher bills may need to look at cost-saving measures, and reducing their number of employees may be one factor to consider.
A Settlement Agreement is a legally binding contract made between an employer and employee, used to bring an end to their employment on agreed terms. Settlement Agreements notably include the employee making a binding promise not to sue the employer and a ‘settlement payment’ being made to the employee.
For those employers looking to end contracts with employees, settlement agreements can provide a good and cost-effective option.
Employers that wish to remove long-standing employees from a business will face the barrier of redundancy. The redundancy process followed correctly can be long and costly – taking weeks of meetings, consultation and periods of notice. Whilst employers must always be sure to act fairly and responsibly, such a lengthy process may not be viable where increased bills are already impacting cash flow.
Settlement agreements are perfectly suited for use in these situations, providing a way forward and creating peace of mind for employers.
In addition to having the benefit of being able to be deployed quickly, using a solicitor to manage the process where multiple settlement agreements are required makes the process much easier to manage for employers. By outsourcing the process, employers can be seen to be impartial, allowing uniformity across all employees that are to be affected.
Employers that are looking at other ways to manage an employee exit – such as performance management or following their disciplinary process – may wish to consider a settlement agreement as a quicker, more certain alternative. Any employee that is sacked or resigns could make a future claim for unfair dismissal or constructive unfair dismissal. The use of a settlement agreement, although carrying an initial upfront cost, reduces any protracted period of dispute and significantly reduces the risk of any future claim from exiting employees.
Due to the legally binding nature of settlement agreements, employees must seek legal advice in relation to the content of a settlement agreement that is presented to them. The cost of this legal advice is usually funded by the employer. At O’Donnell Solicitors, our Employment Law Solicitors are able to offer that required legal advice to employees both at our offices or by attending the business premises. This provides a straightforward and fair process for both employers and employees whilst allowing employers to ensure a uniform approach.
For more information on Settlement Agreements, contact our Employment team at 01457 761 320 or e-mail firstname.lastname@example.org.